(AfDB)-The Board of Directors of the African Development Bank Group has approved a ZAR 2.5 billion (approximately $139 million) corporate loan to the City of Johannesburg Metropolitan Municipality, marking the Bank's first direct lending to a subnational entity in Africa.

The transaction will finance critical infrastructure projects in electricity, water, sanitation, and solid waste management, directly benefiting over 6 million residents in South Africa's economic powerhouse.

The approval marks a transformative moment for municipal financing across Africa, operationalizing the African Development Bank's Guidelines for Subnational Finance for the first time. The funding will exclusively support trading services infrastructure that generates revenue, ensuring sustainable debt repayment, while addressing urgent challenges in service delivery.

“This landmark transaction, led by the African Development Bank’s Infrastructure and Urban Development Department, in coordination with the Water and Sanitation Department,  and the Power Department, signals a new era in how the African Development Bank can empower cities,” said the Bank’s Vice President for Private Sector, Infrastructure & Industrialization, Solomon Quaynor. “By directly financing Johannesburg, we are unlocking a scalable model for subnational lending that enables multi-sectoral infrastructure delivery and positions the Bank as a trusted partner in driving sustainable, inclusive urban development across Africa.”

The loan will finance over 100 carefully selected projects across four vital sectors: upgrading distribution networks, installing smart meters, expanding renewable energy capacity, and connecting 3,200 new households to the grid; rehabilitating aging pipelines, upgrading treatment facilities, and reducing water losses from 46% to 37%;  and improving landfill compliance, expanding recycling facilities, and enhancing waste collection services.

“This historic transaction demonstrates the African Development Bank's commitment to supporting creditworthy cities as engines of economic growth," said the African Development Bank's Director General for Southern Africa, Kennedy  Mbekeani. "Johannesburg is not just South Africa's largest city – it contributes 16% to the country's GDP and serves as a gateway for investment across the continent. By strengthening its infrastructure backbone, we're investing in Africa's urban future."

The City of Johannesburg faces significant infrastructure challenges, with annual electricity losses of 30% for the past three years and water losses of 46.1%. The project is expected to create 2,869 jobs during construction and substantially improve service reliability for millions of residents.

An additional $1.5 million grant through the Bank’s Urban and Municipal Development Fund is being sought to support municipal reforms, governance and climate-resilient planning initiatives.

Beyond infrastructure improvements, the project will deliver significant socioeconomic benefits:

• 592 full-time equivalent jobs, with 14% reserved for women and 23% for youth.
• Reduced electricity and water interruptions will boost productivity for 65% of electricity and 5% of water consumed by industry.
• Enhanced free basic services for 160,000 indigent households.
• ZAR 500 million in contracts earmarked for small and medium enterprises, with 40% reserved for women-owned businesses and 50% for youth entrepreneurs.

The African Development Bank has included comprehensive safeguards in the project to assure robust monitoring and oversight, transparency, compliance, and sound financial management throughout the loan lifecycle.